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Teen stores leading the herd

Abercrombie & Fitch stores pitch a lifestyle with their fashions -- a tactic that's paying off in big sales gains

By Mary Ellen PodmolikSpecial to the TribuneJanuary 14, 2006

When the nation's retailers toted up their holiday season results, one store chasing the fickle teen and young adult markets showed that it had done everything right.

Abercrombie & Fitch reported December sales increased 29 percent.

"They're the `it' brand right now with the high school and college consumer," said Daryl Boehringer, a retail analyst at FTN Midwest Research. "They've done a great job of differentiating their brand across all three segments."

During 2005, the company, whose stores include Abercrombie & Fitch, abercrombie, Hollister Co., and Ruehl, posted high double-digit monthly same sales gains. Then came December, the most important month in the retail calendar, and that remarkable performance of a 29 percent increase in same-store sales. Same-store sales are a good measurement of a retailer's performance because they include only results from stores open at least a year.

Customers say they simply like the clothes. But retail experts point to significant efforts by the New Albany, Ohio-based company to make the stores more inviting, to ensure that all sizes and styles of clothing are available in stores, and to create different store environments, merchandise and prices for different age groups.

One characteristic shared by all divisions is a lack of both sales promotions and advertising.

At Woodfield mall in Schaumburg this week, clearance signs beckoned shoppers into many stores, but there was nary a window sign outside Abercrombie & Fitch.

"We do not advertise in the conventional sense," spokesman Thomas Lennox said. "We advertise through our in-store experience and making that experience very special for our customers. It's the look, the feel, the presentation standards, the music, the smell."

More than a year ago, the rap on Abercrombie was that its stores were less inviting than lower-priced competitor American Eagle because there weren't enough salespeople, and employees spent more time posing than helping customers. The company beefed up staffing levels and trained employees. Now teenage clerks greet customers at the front doors.

With its edgy, preppy clothing, Abercrombie & Fitch aims for a customer age 18 to 22 who is willing to pay $79.50 for jeans and $39.50 for a basic polo shirt. Known for its now-defunct racy magazine and T-shirts with suggestive sayings, the stores have a dark, clubby feel to them with pulsing loud music, wood store fixtures and posters of shirtless young men. Young salespeople regularly spritz the air with cologne.

The chain's catchphrase is "casual luxury."

The abercrombie stores are similar, minus the posters with bare chests, with a theme of "classic cool" for 10- to 14-year-olds who want to dress like older siblings.

Hollister, considered the company's growth vehicle, tries to replicate a California surfer lifestyle, complete with stores that resemble a well-appointed surfer shack. Aimed at high-school students, the prices are about 30 percent lower than Abercrombie & Fitch stores.

The newest format is Ruehl, which has eight stores and is aimed at post-collegiate young adults.

Tinley Park resident Nicole Lesiak, 18, has been an Abercrombie & Fitch shopper since she was 13 and wanted to look older. This week while at Woodfield, she picked up two shirts and a pair of sweatpants on clearance at Hollister and then headed to the company's namesake store to browse. "It's my style, real vintage-y," Lesiak said. "You can get kicking-back stuff and also stuff to go out.

"A lot of times, it's not on sale," she noted. And what does she think of that? "It's the fashion."

That's exactly the sentiment the company wants to hear, said Adrienne Tennant, a retail analyst who follows the company for Wedbush Morgan Securities.

"It drives you to buy at full price," Tennant said. "They're creating this feeling of you're not going to get it on sale so you better get it now."

In a fall survey of teens by Northbrook-based Teenage Research Unlimited, only three apparel brands cracked the top 10 list of coolest brands. No. 1 was Nike, followed by Sony.

Abercrombie & Fitch was third, American Eagle Outfitters was fourth, and Hollister, which made it into the top 10 for the first time, came in fifth.

"When you're shopping at Abercrombie, you're buying into so much more than a pair of jeans or a top," said Michael Wood, vice president at Teenage Research. "You're buying into the lifestyle that Abercrombie has so brilliantly built. It's really a store that appeals to them. They want to be comfortable and they are attracted to things that are upscale. This is a very sophisticated and savvy cohort."

The company's growth plans include opening flagship Abercrombie & Fitch stores in key U.S. cities and opening the first international stores in Canada this month, which will double the size of the Hollister chain. It also plans to add abercrombie stores in select malls and refine the Ruehl concept before it is more fully rolled out.

"At the end of the day, the A&F brand, the adult brand, is iconic in nature," Michael Kramer, Abercrombie's senior vice president and chief financial officer, told retail analysts at a meeting Wednesday.

"Abercrombie & Fitch is now an adjective. You refer to a high school or college [student] as an Abercrombie kid," he said. "You're referring to their lifestyle, their look. This leads us to believe the brand is iconic.

"We are focused on following that," Kramer said.

As for the fashion, Abercrombie continues to see greater demand for its basic items like denim, fleece and graphic T-shirts, and it will try to satisfy those appetites. But because teens seemingly change their fashion tastes as often as their socks, could Abercrombie lose favor, as it did a few years ago?

FTN Midwest's Boehringer likes Abercrombie's chances of staying on top with teens long term, despite its higher prices, because of its decision not to join other chains in a pricing game.

"A lot of players have gotten more aggressive with promotions, but not Abercrombie," he said. "That provides a better brand image with the consumer and it doesn't dilute the brand."

Teenage Research's Wood agrees.

"This generation is becoming less fickle," Wood said. "They have very high expectations and they are very demanding but they're willing to give them some rope."